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Validus Announces Full Year 2012 Net Income Of $408.4 Million And Fourth Quarter 2012 Net Loss Of $(90.7) Million

This conference call will also be available through a live audio webcast accessible through the Investor Relations section of the Company's website located at www.validusholdings.com. A replay of the webcast will be available at the Investor Relations section of the Company's website through February 15, 2013. In addition, a financial supplement relating to the Company's financial results for the three months and year ended December 31, 2012 is available in the Investor Relations section of the Company's website.

About Validus Holdings, Ltd.

Validus Holdings, Ltd. is a provider of reinsurance, insurance, and insurance linked securities management operating through three primary segments, Validus Reinsurance, Ltd., Talbot Holdings Ltd. and AlphaCat Managers, Ltd. Validus Reinsurance, Ltd. (“Validus Re”) is a Bermuda based reinsurer focused on short tail lines of reinsurance. Talbot Holdings Ltd. (“Talbot”) is the Bermuda parent of the specialty insurance group primarily operating within the Lloyd's insurance market through Syndicate 1183. AlphaCat Managers, Ltd. (“AlphaCat”) is a Bermuda based investment adviser, managing third-party capital in insurance linked securities and other investments in the property catastrophe reinsurance space.

Validus Holdings, Ltd.

Consolidated Balance Sheets

As at December 31, 2012 and December 31, 2011

(Expressed in thousands of U.S. dollars, except share and per share information)

(Expressed in thousands of U.S. dollars, except share and per share information)

Three Months Ended December 31,

Year Ended December 31,

2012

2011

2012

2011

Underwriting income

Gross premiums written

$

311,847

$

278,279

$

2,166,440

$

2,124,691

Reinsurance premiums ceded

(35,659

)

(16,489

)

(307,506

)

(289,241

)

Net premiums written

276,188

261,790

1,858,934

1,835,450

Change in unearned premiums

223,098

226,556

14,282

(33,307

)

Net premiums earned

499,286

488,346

1,873,216

1,802,143

Underwriting deductions

Losses and loss expenses

458,310

334,829

999,446

1,244,401

Policy acquisition costs

81,814

81,253

334,698

314,184

General and administrative expenses

65,095

52,253

263,652

197,497

Share compensation expenses

7,126

7,237

26,709

34,296

Total underwriting deductions

612,345

475,572

1,624,505

1,790,378

Underwriting (loss) income

$

(113,059

)

$

12,774

$

248,711

$

11,765

Net investment income

28,802

28,080

107,936

112,296

Other income

187

3,517

22,396

5,718

Finance expenses

(14,510

)

(13,520

)

(53,857

)

(54,817

)

Operating (loss) income before taxes and (loss) income fromoperating affiliates

$

(98,580

)

$

30,851

$

325,186

$

74,962

Tax (expense) benefit

(615

)

226

(2,501

)

(824

)

(Loss) income from operating affiliates

(614

)

—

12,580

—

Net operating (loss) income

$

(99,809

)

$

31,077

$

335,265

$

74,138

Gain on bargain purchase, net of expenses (a)

21,485

—

17,701

—

Net realized (losses) gains on investments

(4,516

)

5,355

18,233

28,532

Net unrealized (losses) gains on investments

(35,857

)

2,159

17,585

(19,991

)

(Loss) from investment affiliate

(406

)

—

(964

)

—

Foreign exchange gains (losses)

1,181

266

4,798

(22,124

)

Transaction expenses (b)

—

(3,850

)

—

(17,433

)

Net (loss) income

$

(117,922

)

$

35,007

$

392,618

$

43,122

Net loss (income) attributable to noncontrolling interest

27,206

(7,683

)

15,820

(21,793

)

Net (loss) income (attributable) available to Validus

$

(90,716

)

$

27,324

$

408,438

$

21,329

Selected ratios:

Net premiums written / Gross premiums written

88.6

%

94.1

%

85.8

%

86.4

%

Losses and loss expenses

91.8

%

68.6

%

53.4

%

69.1

%

Policy acquisition costs

16.4

%

16.6

%

17.9

%

17.4

%

General and administrative expenses (c)

14.5

%

12.2

%

15.5

%

12.9

%

Expense ratio

30.9

%

28.8

%

33.4

%

30.3

%

Combined ratio

122.7

%

97.4

%

86.8

%

99.4

%

(a)

The gain on bargain purchase, net of expenses, arose from the acquisition of Flagstone Reinsurance Holdings S.A. on November 30, 2012 and is net of transaction related expenses which included legal, financial advisory, audit related services and termination expenses.

(b)

The transaction expenses for 2011 relate to costs incurred in connection with the Company's proposed acquisition of Transatlantic Holdings, Inc. Transaction expenses are primarily comprised of legal, financial advisory and audit related services.

(c)

The general and administrative expense ratio includes share compensation expenses.

Validus Holdings, Ltd.

Consolidated Segment Underwriting Income (Loss)

For the three months and year endedDecember 31, 2012 and 2011

(Expressed in thousands of U.S. dollars, except share and per share information)

Three Months Ended December 31,

Year Ended December 31,

2012

2011

2012

2011

Validus Re

Gross premiums written

$

79,233

$

55,851

$

1,131,959

$

1,114,493

Reinsurance premiums ceded

(7,074

)

(49

)

(144,578

)

(150,718

)

Net premiums written

72,159

55,802

987,381

963,775

Change in unearned premiums

213,105

196,679

35,890

2,150

Net premiums earned

285,264

252,481

1,023,271

965,925

Underwriting deductions

Losses and loss expenses

331,130

215,903

575,416

749,305

Policy acquisition costs

40,703

39,227

154,362

154,582

General and administrative expenses

14,716

11,716

63,048

44,663

Share compensation expenses

1,849

2,191

7,763

9,309

Total underwriting deductions

388,398

269,037

800,589

957,859

Underwriting (loss) income

(103,134

)

(16,556

)

222,682

8,066

AlphaCat

Gross premiums written

$

(4

)

$

(1,323

)

$

21,603

$

75,727

Reinsurance premiums ceded

—

—

—

—

Net premiums written

(4

)

(1,323

)

21,603

75,727

Change in unearned premiums

5,895

27,834

(3,937

)

(9,761

)

Net premiums earned

5,891

26,511

17,666

65,966

Underwriting deductions

Losses and loss expenses

—

10,000

—

10,000

Policy acquisition costs

589

3,331

1,774

7,946

General and administrative expenses

2,011

6,807

7,532

10,929

Share compensation expenses

84

33

279

107

Total underwriting deductions

2,684

20,171

9,585

28,982

Underwriting income

3,207

6,340

8,081

36,984

Talbot

Gross premiums written

$

241,100

$

235,242

$

1,078,636

$

1,014,122

Reinsurance premiums ceded

(37,067

)

(27,931

)

(228,686

)

(218,174

)

Net premiums written

204,033

207,311

849,950

795,948

Change in unearned premiums

4,098

2,043

(17,671

)

(25,696

)

Net premiums earned

208,131

209,354

832,279

770,252

Underwriting deductions

Losses and loss expenses

127,180

108,926

424,030

485,096

Policy acquisition costs

41,745

41,160

183,926

157,334

General and administrative expenses

32,371

29,676

133,281

112,072

Share compensation expenses

2,442

1,934

7,789

8,582

Total underwriting deductions

203,738

181,696

749,026

763,084

Underwriting income

4,393

27,658

83,253

7,168

Validus Holdings, Ltd.

Consolidated Segment Underwriting Income (Loss) - Continued

For the three months and year ended months ended December 31, 2012 and 2011

(Expressed in thousands of U.S. dollars, except share and per share information)

Three Months Ended December 31,

Year Ended December 31,

2012

2011

2012

2011

Corporate & Eliminations

Gross premiums written

$

(8,482

)

$

(11,491

)

$

(65,758

)

$

(79,651

)

Reinsurance premiums ceded

8,482

11,491

65,758

79,651

Net premiums written

—

—

—

—

Change in unearned premiums

—

—

—

—

Net premiums earned

—

—

—

—

Underwriting deductions

Losses and loss expenses

—

—

—

—

Policy acquisition costs

(1,223

)

(2,465

)

(5,364

)

(5,678

)

General and administrative expenses

15,997

4,054

59,791

29,833

Share compensation expenses

2,751

3,079

10,878

16,298

Total underwriting deductions

17,525

4,668

65,305

40,453

Underwriting (loss)

(17,525

)

(4,668

)

(65,305

)

(40,453

)

Total underwriting (loss) income

$

(113,059

)

$

12,774

$

248,711

$

11,765

Validus Holdings, Ltd.

Non-GAAP Financial Measure Reconciliation

Managed Gross Premiums Written

For the three months and year ended December 31, 2012 and 2011

(Expressed in thousands of U.S. dollars, except share and per share information)

Three Months Ended

Year Ended

December 31,

December 31,

December 31,

December 31,

2012

2011(a)

2012

2011(a)

Total gross premiums written

$

311,847

$

278,279

$

2,166,440

$

2,124,691

Adjustments for:

Gross premiums written on behalf of AlphaCat Re 2011

8

—

94,317

—

Gross premiums written on behalf of AlphaCat Re 2012

(45

)

—

32,171

—

Total managed gross premiums written

$

311,810

$

278,279

$

2,292,928

$

2,124,691

(a)

Total gross premiums written for the three months and year ended December 31, 2011 included $(1.4) million and $60.0 million, respectively of gross premiums written from AlphaCat Re 2011, which was a consolidated subsidiary during the three months ended June 30, September 30 and December 31, 2011. The balance sheet of AlphaCat Re 2011 was deconsolidated as at December 31, 2011.

Validus Holdings, Ltd.

Non-GAAP Financial Measure Reconciliation

Net Operating Income (loss) available (attributable) to Validus, Net Operating Income (loss) per share available (attributable) toValidus and Annualized Net Operating Return on Average Equity

For the three months and year ended December 31, 2012 and 2011

(Expressed in thousands of U.S. dollars, except share and per share information)

The gain on bargain purchase, net of expenses, arises from the acquisition of Flagstone Reinsurance Holdings S.A. on November 30, 2012 and is net of transaction related expenses which included legal, financial advisory, audit related services and termination expenses.

(b)

The transaction expenses for 2011 relate to costs incurred in connection with the Company's proposed acquisition of Transatlantic Holdings, Inc. Transaction expenses are primarily comprised of legal, financial advisory and audit related services.

Validus Holdings, Ltd.

Non-GAAP Financial Measure Reconciliation

Book Value and Diluted Book Value per Common Share

As at December 31, 2012 and December 31, 2011

(Expressed in thousands of U.S. dollars, except share and per share information)

As at December 31, 2012

EquityAmount

Shares

ExercisePrice

Book ValuePer Share

Book value per common share

Total shareholders' equity available to Validus

$

4,020,827

107,921,259

$

37.26

Diluted book value per common share

Total shareholders' equity available to Validus

4,020,827

107,921,259

Assumed exercise of outstanding warrants

118,015

6,410,472

$

18.41

Assumed exercise of outstanding stock options

37,745

1,823,947

$

20.69

Unvested restricted shares

—

2,443,631

Diluted book value per common share

$

4,176,587

118,599,309

$

35.22

As at December 31, 2011

EquityAmount

Shares

ExercisePrice

Book ValuePer Share

Book value per common share

Total shareholders' equity available to Validus

$

3,448,425

99,471,080

$

34.67

Diluted book value per common share

Total shareholders' equity available to Validus

3,448,425

99,471,080

Assumed exercise of outstanding warrants

121,445

6,916,678

$

17.56

Assumed exercise of outstanding stock options

45,530

2,263,012

$

20.12

Unvested restricted shares

—

3,340,729

Diluted book value per common share

$

3,615,400

111,991,499

$

32.28

Cautionary Note Regarding Forward-Looking Statements

This press release may include forward-looking statements, both with respect to the Company and its industry, that reflect our current views with respect to future events and financial performance. Statements that include the words "expect", "intend", "plan", "believe", "project", "anticipate", "will", "may" and similar statements of a future or forward-looking nature identify forward-looking statements. All forward-looking statements address matters that involve risks and uncertainties, many of which are beyond the Company's control. Accordingly, there are or will be important factors that could cause actual results to differ materially from those indicated in such statements and, therefore, you should not place undue reliance on any such statements. We believe that these factors include, but are not limited to, the following: 1) unpredictability and severity of catastrophic events; 2) rating agency actions; 3) adequacy of Validus' risk management and loss limitation methods; 4) cyclicality of demand and pricing in the insurance and reinsurance markets; 5) statutory or regulatory developments including tax policy, reinsurance and other regulatory matters; 6) Validus' ability to implement its business strategy during "soft" as well as "hard" markets; 7) adequacy of Validus' loss reserves; 8) continued availability of capital and financing; 9) retention of key personnel; 10) competition; 11) potential loss of business from one or more major insurance or reinsurance brokers; 12) Validus' ability to implement, successfully and on a timely basis, complex infrastructure, distribution capabilities, systems, procedures and internal controls, and to develop accurate actuarial data to support the business and regulatory and reporting requirements; 13) general economic and market conditions (including inflation, volatility in the credit and capital markets, interest rates and foreign currency exchange rates); 14) the integration of businesses Validus may acquire or new business ventures Validus may start; 15) the effect on Validus' investment portfolios of changing financial market conditions including inflation, interest rates, liquidity and other factors; 16) acts of terrorism or outbreak of war; and 17) availability of reinsurance and retrocessional coverage, as well as management's response to any of the aforementioned factors.